The Bulls and the Bears

This past August, both Canadian and U.S. equity markets boasted a new record for having one of the longest bull markets in modern financial times. What does that mean for your portfolio?

What Historic Markets Show Us

Let’s take a look back at the history of the bull and bear markets of the S&P/TSX Composite Index since 1970. There have been eight bull markets and seven bear markets. Bull markets have been longer, averaging around 63.5 months, whereas bear markets have lasted on average only around 10.7 months. Bull markets have provided a more significant percentage change in value — given that it takes a 100 percent gain to make up for a 50 percent loss, the gains were enough to produce significant returns, as shown in the chart below.

Defining Bull and Bear Markets

A bull market is often defined as a period in which stocks have increased by at least 20 percent, over at least a two-month period.

A bear market occurs when stocks have fallen by at least 20 percent.

Will the Bull Market Continue?

Does the current aging bull market still have legs to run? Nobody can predict the direction of near-term markets, except to say that equity markets are cyclical. Given that there are differing ways to define a bull market, by some accounts this isn’t the longest run in recent times, which may provide comfort to those who support the old adage that bull markets never simply die of old age.

Managing Your Portfolio

But, as history has shown, the upturns, on balance, have lasted much longer than the downturns and have taken stock prices to much higher levels than their former peaks. Regardless, we continue to manage portfolios with the expectation that stock markets will experience both bull and bear markets. All good food for thought, as we continue to look forward.


Source: Bloomberg Article